High gold prices prompt some Asian consumers to sell back physical gold this week in a hunt for profits. Cheaper silver emerges as a preferred investment. Some investors use temporary price dips to buy, hoping to cash in on a further leg up.
Demands remain sluggish in India as prices hold at record highs, prompting dealers to offer discounts for the eighth straight week.
Harshad Ajmera, the proprietor of JJ Gold House, says that jewelers are not making new purchases due to higher prices. They are getting scrap supplies at a discount, which they can use for jewelry making.
Dealers offer discounts of up to $24 an ounce over official domestic prices, compared with $33 last week, which was the highest since August 2016. The local price includes a 12.5% import tax and 3% GST duty.
A Mumbai-based dealer with a private bullion prominent bank states that legal imports have plunged due to the duty hike. Imports would be less than 40 tonnes in July.
India raised import duties on gold and other precious metals to 12.5% from 10% earlier this month.
Brian Lan, managing director at Singapore dealer GoldSilver Central, says with prices already at high levels, consumers have decided to re-sell. Every time there is a price correction, we might see some investors and wholesalers buying. He adds that we see more buying in silver rather than gold. People are looking for undervalued assets, and it seems like they have decided that silver is the asset.
Gold was sold at a premium of $10-$12 per ounce over the benchmark in top-consumer China. Little has changed from last week’s $10-$11.
In Hong Kong, gold was sold at a premium of $0.50-$1.20 an ounce, unchanged from last week.
Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong, states that demand for gold is coming mostly from the investment side.
He adds that the rate of sell-back from consumers has slowed since most expect prices to go even higher.